Recently-passed tax reform left 401k contribution limits intact, thereby stealing some of the shine from HSAs, but compelling reasons remain for the product.
Devenir, a thought leader in the HSA investment marketplace, has released a white paper comparing the growth of the HSA marketplace to 401ks.
“2018 is here, and both employers and accountholders are funding HSAs for the new year,” the Minneapolis-based HSA provider notes. “In order to help accountholders make the most of their health care dollars, we took an in-depth look at investing in an HSA vs. 401k.
After analysis “from many angles” including tax, behavioral, and industry-level, Devenir compiled the three key HSA features as they compare with 401ks.
- It argues that HSAs are flexible, beginning with “tax efficiency and investment capabilities [that] differentiate HSAs, but other benefits like the lack of a “use it or lose it” limitation, individual ownership not tied to any employer, and the ability to select a provider while enrolled in an HSA eligible health plan set HSAs apart as a powerful bridge between health and retirement.”
- Second, it rightly notes that healthcare costs can be unpredictable, and “Investing within an HSA gives accountholders a tool to potentially counter rising costs over the long run, but with added risk.”
- Lastly, HSAs are still new to many investors, and “while they have been around for 14 years, many Americans still hadn’t heard of HSAs until their recent prominence in proposed healthcare legislation.”
Ultimately, the analysis concludes that HSAs “may have a leg up on tax efficiency” and are practical for a wide range of consumers, but “account providers must help participants make the most of their HSA.”
“Consumers continue to look for effective ways to navigate their healthcare savings and understand the advantages HSAs have to offer,” Zach Haas, author of the white paper and investment analyst at Devenir, said in a statement. Using 401ks as a baseline is a great way to tell the value story of HSAs and where they fit in the retirement picture.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
